Top 25 Lower Middle Market Investment Banks | Q1 2024
Axial is excited to release our Q1 2024 Lower Middle Market Investment Banking League Tables. To assemble this list, we…
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Last quarter, we surveyed the Axial Investment Bank membership on the topic of exit preparation. We previously covered valuation expectations and the contributing factors that lead to buyer and seller misalignment. Today, we are diving deeper and sharing insights on the valuation outlook for 2024.
We are grateful to all the Investment Bankers who contributed to the survey and provided useful color for this series on exit preparation. The 18 Investment Bankers below are quoted in todayâs feature.
Do you think valuations will go up or down in 2024?
In order to better understand the divide in valuation expectations, we asked these Investment Bankers to expand on the contributing factors that will impact this yearâs valuations. While responses consistently highlighted macroeconomic factors, the rationales behind these factors varied. Select responses are included below.
Valuations Will Go Up
| Which factors do you think will impact 2024 valuations the most? |
|---|
| The unique story of the company, management, how the financial performance has come out of COVID, and the sustainability of those results. Keith Yonkers 41 North |
| Return to steady growth and margin improvement after the volatility experienced in 2022-2023, Comparatively small portion of available assets being of high quality. Nicholas Somos Left Lane Associates |
| More certainty in interest levels and more certainty around the economy will lead to more credit availability. Also, a number of PE firms getting very few deals done in 2023 will cause a surge of activity. Scott Mitchell SDR Ventures |
| 2024 is poised for increased M&A activity which could spark a rebound in valuation levels. Prospective buyers have cash and ample liquidity. Credit markets are improving. C-Suite confidence is rising as management teams and boards adjust to the "new normal". Brian Egwele Egwele & Company |
| Interest rates, available capital, consolidation. April Mason Paragon Ventures |
| Lower inflation and more stable economic environment. Ray Johnson Exit Experts |
Valuations Will Go Down
| Which factors do you think will impact 2024 valuations the most? |
|---|
| Political uncertainty, rising risk of larger military conflicts. Robert Latham IBG Business |
| Availability of debt / leverage and interest rates, followed modestly by slower growth rates. Craig Dickens Merit Investment Bank |
| Higher interest rates. This will increase debt service loads, which will lessen the available cash flow for buyers. This will also reduce the valuation ceiling of a particular company. In the end, a business' asking price must take into consideration debt service. Shep Campbell Merger & Acquisition Specialists |
| Interest Rates, Uncertainty, normalization of EBITDA as we continue to pull away from the Covid era. Michael Schuster Cross Keys Capital |
| More than anything, out of control inflation and reckless monetary policy, creates the biggest risk to the economy. We continue to âeaseâ funds through the Fed and the result is primary and regional banks have billions of unrealized losses. Mark Thomas M&A Healthcare Advisors |
| The presidential cycle can have a paralyzing impact on the market. Again, good companies will still trade, but the smaller tuck-ins will suffer. Aaron Delidow Provest Inc |
Valuations Will Stay The Same
| Which factors do you think will impact 2024 valuations the most? |
|---|
| Cost of capital. But seller expectations continue to fall so volume will pick up.. Ramsey Goodrich Carter Morse & Goodrich |
| Interest rates and political environment (presidential race). Valuations will continue to remain lower than they were in 2021 and 2022. Erik Endler Three Twenty-One Capital Partners |
| US interest rates, consumer spending, dry powder from strategics and PE, and overseas geopolitical environment. Sally Anne Hughes Hughes Klaiber |
| Resurgence of IPO market; rebound in the stock market; tapering off of interest rate hikes. Patricia Stensrud Avalon Securities Ltd. |
| Many factors: 1) creative capital investment to avoid expensive debt, 2) a 'meet in the middle' on valuations, and 3) what else are we gonna do with all this dry powder? Rouzheen Myrick Palm Tree |
| Federal reserves desire to reduce inflation with quantitative tightening and longer term high rates causing banks to reduce lending. Ronald D Torretti Turris Group Inc. |
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Additional Resources
This is issue 3 of a 5-part series featuring the Investment Banker survey results. If you’re interested in learning more, the first two articles are included below along with some additional business owner resources.
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